Industry Trend Analysis - Indian Import Duties To Usher In Palm Oil Price Weakness - JAN 2018

BMI View : India ' s new import duties on edible oils have caused MDE palm oil prices to fall below MYR2,600/tonne, in line with our forecasts. Indian producers will struggle to substitute for imports over the short term, but increased yields and the introduction of GMO varieties could help the country reduce its import-dependency.

On Friday 17 th of November, the Indian government announced an increase in import taxes on edible oils, lifting import duties on crude palm oil from 15% to 30% and on refined palm oil from 25% to 40%. Similar hikes were imposed on crude and refined soy-oil. The announcement has driven a fall of more than 3% in Malaysian palm oil futures, to a low of MYR2,589/tonne. This is in line with our view for palm oil prices to break multi-year support and head down towards MYR2,600/tonne over Q418-H117 (see ' Palm Oil: Subdued Prices To 2021 ' 15 November 2017). The move will set the scene for relative price weakness over the rest of our forecast period to 2021.

India was the world's leading consumer of palm oil in 2016, and imports accounted for 97% of its domestic needs. India is also a major consumer of soy-oil, and it decision has put it at loggerheads with the major exporters of edible oils, including Malaysia, Brazil and Argentina.

Market Reacts To Indian Oilseed Import Duties
Third Month MDE Palm Oil, MYR/tonne (daily chart)
Source: Bloomberg, BMI

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